Friday, July 31, 2009

Paying More for "Something" Better

One of the interesting things about MBA programs is that the later stages tend to produce the best thinking. You've been exposed to more concepts, new ideas and new ways of thinking from smart classmates. Here's an example of how many concepts start coming together:

I wrote yesterday about the innovative concept of "Plenty" currency in Pittsboro, NC as they look to encourage local business. In this case, it's local residents making a conscious decision to support the local economy. Whether that is motivated by discounted pricing, or local pride would need to be investigated, but I suspect it's a combination of both.

But what happens when you'd be asked to pay more for something, where the that "something" might not be a physical attribute. For example, take this discussion on Fair-Labour iPod costs from Umair Haque. Initially he lays out some calculations for how much price is affected by an element that some people disagree with, namely Chinese labor*. While not exact calculations, he highlights roughly what the cost differences would be if US labor was used. Then he poses the difficult question, "Would you be willing to pay more for the iPod to give yourself the peace of mind that it was 'built in America'"? In essence he's asking if you're willing to sacrifice you're near-term wallet for the potential of longer-term prosperity (not guaranteed) in the area where you live?

[NOTE: *after speaking with some US companies that use Chinese labor during our trip, it's important to remember that those workers are in those jobs to better their lives and their families. Their perception of the low wages isn't the same as what we have in affluent America. Just noting this for completeness of viewpoints on foreign labor.]

Haque then goes on to talk about the multiplicative effect this type of thinking can have on the overall prosperity of an economy that's built on "creating new value". The difficult piece of his argument isn't that its not possible, it's how to convince the everyday person to make those considerations. It highlights the same types of challenges I'm starting to explore on my Environmental Capitalist blog.

To make this change of thinking possible, it starts getting at the types of things my classmate Gregg Lewis is constantly trying to teach me with regard to Environmentally Sustainable architecture.
  • It's about trying to break people of the habit of measuring "value" based on 20th century measurements (price/sq.ft, cost on the price-tag, etc.)
  • It's about helping people understand the broader impact their consumption decisions have on the economy and environment. What does saving $1 on the purchase price translate into for the overall local/state/national economy? What does it translate into for environmental costs (transportation, disposal, etc.)?
  • It's about helping people understand that the availability of "immediacy" consumption isn't really satisfying the true needs of people, it's just satisfying the immediacy impulses.
Changing behaviors is difficult (see "failed diets" and "lack of savings"), but I believe this type of mindset is going to be critical to adopt as we proceed into the 21st century. Consuming more intelligently forces better designs from manufacturers, as well as forcing us to think about the bigger impact our day-to-day decisions have on our role in the global ecosystem.
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